I've just finally built myself a new kernel (2.4.31 from linux-mips) and it
actually boots. The problem is (and I dont know if anyone has encoutered
this before): I see CoLo loading, then the kernel loads BUT it ignores the
"execute root=/dev/hda4 console=ttyS0,115200" line from my
/boot/default.colo file. If I switch back to my 2.4.27-r5k-cobalt kernel it
works (it uses the default.colo arguments). I even tried setting the kernel
command line hardcoded into the kernel, and it still does the same thing.
One more thing, this box was just freshly installed 2 days ago with Sarge
(since then I'm having a headache figuring out the new kernel issue because
the current one has network connectivity issues)

here is a copy/paste of the boot sequence from my Raq2 from CoLo to the
kernel panic